KPMG Global Retail Director discusses industry trends for 2012

1 Comment | This entry was posted in NRF Foundation, Research, Retail Trends

For retailers, there’s not much left to do with the remnants of the recession other than pick up, learn and move on – and that’s just what they are doing. According to the NRF Foundation’s recently released Retail Horizons: Benchmarks for 2011, Forecasts for 2012, retailers in the coming months will focus solely on initiatives that drive sales growth and grow their customer base rather than the cost-containing initiatives seen well throughout 2009, 2010 and even 2011. According to the report, building mobile capabilities, investing in leadership development, furthering IT upgrades, optimizing their merchandising, increasing their spend on marketing and advertising and growing their customer relationship management tools are all top priorities for retailers in 2012.

A partner of the NRF Foundation and sponsor of the report, KPMG offered their insight into the top five takeaways. To lay out the most important components of the report and those top strategic initiatives for retailers, as well as lessons learned from 2011, KPMG’s Global Head of Retail Mark Larson details the top themes of the report which include: 1. More retailers have returned to profitability; 2. Strategy has shifted from cost containment to growth acceleration; 3. Retailers will demonstrate that in 2012, it’s all about the customer; 4. Shopping is increasingly mobile and online; and 5. A business is only as good as the people who run it. Read on for Larson’s thoughts on these trends and more.

1. More retailers have returned to profitability.

Mark Larson, Partner from KPMG U.S. and Global Retail Industry Leader

Mark Larson, Partner from KPMG U.S. and Global Retail Industry Leader

The past few years have forced retailers to make difficult decisions, improve efficiencies, restructure and, in some cases, move away from certain non-core business lines. This disciplined approach has help strengthen companies – in terms of business processes, product offerings, and most importantly on their balance sheets. As a result of their restructuring and business improvements efforts they have emerged more profitable, leaner and more agile. The industry is regaining much of the momentum that the economic downturn might have sapped, and with stronger balance sheets companies are now in a position to reinvest in growth.

2. Strategy shifted from cost containment to growth acceleration.

Compared to the past few years, participants in the survey indicated a focus on growth, building on the efficiency gains made in the prior years.  In fact, executives in every function, with the exception of supply chain, downshifted their emphasis on cost reduction this year, as efficiency gains and other operating improvements helped cushion margins and stem losses. Retailers spent the year focused on generating top-line growth by expanding their product lines and footprint. In support of that, marketing and advertising spend rose for the first time in a few years, with most retailers employing funds to increase awareness, improve the quality of customer outreach, and deepen their multichannel presence. Headcount also stabilized, even growing in some cases as back-office functions like IT added staff in an effort to keep pace with the increased demands placed upon it. Given there is a shift in strategy from containment to growth acceleration, there are immense opportunities for retailers over the next two to three years to improve selling platforms, customer engagement, business performance and processes and much more.

3. Retailers demonstrate it’s all about the customer.

Retailers see customer satisfaction as the key conduit to accelerating sales growth, particularly amid declining retention rates and increased fragmentation. Consumer-focused businesses are awash in information on their markets, merchandise, prices, and customers. Retailers have more information available to them than ever before, but in our experience at KPMG, companies have difficulty taking full advantage of their large pools of data, typically millions of transaction level data points, in a systematic way. As we found in this year’s survey, companies showed an increased reliance on data mining and analytics, improving the one-to-one marketing experience, and segmenting the customer base by profitability, long-term value, and other parameters. As a result, expanding wallet share now rivals, or exceeds, market share in importance. Stores have stepped up efforts to build customer engagement and loyalty in response, with investments targeted at personalized, one-to-one marketing and customer-specific promotions.

Retailers demonstrated that improved customer service is more than talk this year. Far more organizations linked compensation to customer satisfaction. This was true from the leadership level on down: 36% said it influenced compensation at the corporate level; 73% at the field management level; 77% at the store management level; 50% at the store associate level, and 59% at the call center level.

4. Shopping is increasingly mobile and online.

It comes as no surprise that shopping is increasingly mobile and online. Survey data suggests that having a digital presence (i.e. web, social media, mobile) is now considered a business necessity: 100 percent of those polled have a web presence, and the majority make close to their full in-store assortment available online. In 2011, retailers continued to work hard to plan and integrate their web assets and offer a consistent look and feel across all sales channels. They also focused on the effective use of social networking sites (40%), integrating their online presence with other channels (40%), and creating a more interactive online offering (38%).

This year’s survey respondents also indicate that mobile payment platforms for consumers to make purchases either in store or online will continue to gain momentum in 2012. Four in 10 say building out their mobile shopping and payments capabilities will be a key strategic priority over the next 12 months, a 15% increase over this year. As mentioned above, it is all about the customer, so retailers need to actively enhance and evolve their methods for consumer interaction in an effort to near that “perfect” one-ton-one experience. Shopping habits and expectations are very personal and vary greatly from consumer to consumer, but one thing is clear…a large population of consumers have completely adopted the mobile shopping experience, and this trend will continue as demographics move younger. Retailers who develop the right strategies and approaches to this relatively new platform will be in much stronger position that those who do not.

5. A business is only as good as the people who run it.

At KPMG, our people are absolutely critical to the success of our business. This is true in retail as well. Retailers recognize the need to groom leaders with the skills and acumen to manage across disciplines, assess new growth markets, and work through solving business complexities. More than 80% of human resources executives responding to this year’s Retail Horizons study said leadership development and succession planning was their top strategic priority – and 91% intend to make it their lead initiative heading into 2012.

Challenges with talent management resonated beyond the top echelons of leadership. As retail business models transition from their physical, brick-and-mortar roots to an increasingly digital marketplace, stores must balance the need for newer, non-traditional skill sets, while deepening their core management experience set. With hiring back on the agenda, those issues have become more pressing. Talent management came in second only to leadership development as the key priority for 2012. Given the importance of human capital to a retail business and renewed focus on leadership development, talent management, and retention, it is critical for retail companies to have strong people management strategies in place – including succession plans, employee training programs and career path projections.

Learn more about the NRF Foundation’s Retail Horizons report or purchase a copy now.

Posted in: NRF Foundation | Research | Retail Trends and tagged , ,

One Comment

  1. avatar Mark Shuda
    Posted February 17, 2012 at 12:21 pm | Permalink

    Great work by KMPG.
    Customer service going beyond customer expectations is clearly the differentiator in all channels of retail.
    I think retailers are going to be forced to rethink their pricing strategies due to smart devices. Most retailers have deployed “zone pricing”, some with different retail prices at stores within the same city!
    I recently was listening to a radio talk show which was saying that “retailers” are “upset” about their stores becoming “showrooms” for products that are have their UPC numbers scanned by a smart phone and then purchased at the least expensive retailer and channel.
    The above-described scenario is a direction for the retailer to make it about “the shopping experience”, truely personal selling, and customer relationship management.
    In the early days of retail, commissioned sales people in department stores would keep note cards with their customers wants, needs and tastes, even birthdays on file. They would organize their files so they would have regular contact with their customers. (This has been the “Nordstrom” way for decades!)
    Intelligent retailers will arm their associates with smart devices to allow them to “get closer” to their customers and make the experience personal again.
    Retails will need to make it less about price, and more about service (multi-channel) .
    JCPenney’s fair and square strategy is an example of this. Watch for others to follow.

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